Saudi Arabia HVAC-R Market Outlook, 2021 - CABA

Saudi Arabia Thermal Insulation Market Share, By TypeFigure 4: Saudi Arabia Thermal Insulation Market Share, By Type, By Value, 2015 & rs, .55%2015PolyurethaneFoam,17.15%Others, 7.68%2021FPolyurethaneFoam,17.96%Mineral Wool,27.19%Mineral Wool,27.71%Others include Polystyrene, Cork, etc.Source: TechSci ResearchIn 2015, Government of Saudi Arabia allocated oupgradation of existing infrastructure and building of newFigure 5: Saudi Arabia Electricity ConsumptionShare, By Sector, By Value, 2014Industries,20.14%Others, 3.54%projects. Some of the planned and underway projects taining to utilities, transport, education, uireinstallation of thermal insulation materials in buildingsand this is anticipated to boost growth in the country’sthermal insulation market.Buildings,76.32%14Others include transportation, agriculture, etc.Source: TechSci Research TechSci Research

Saudi Arabia Thermal Insulation Market Share, ByApplicationFigure 6: Saudi Arabia Thermal Insulation Market Share, By Application, By Value, 2015 & %Source: TechSci ResearchTable 6: Saudi Arabia Percentage of HomesThermally Insulated, By City, 2014Commercial, 31.82%Climate of Saudi Arabia is hot and it requires regular use ofHVAC-R in buildings. Use of thermal insulation in buildingsCity% Home InsulatedJeddah15Riyadh50Qassim3Dammam29saves electricity. Only 26.5% of buildings in the country wereAbha16thermally insulated in 2014. In Jeddah, 85% of the buildingsHail23lack insulation as of 2014. Around 72.6% of houses in theJizan24Eastern Province and 50% in Riyadh were not thermallyOverall26.5helps in maintaining temperature inside rooms by minimizingdissipation of heat through building walls. Reduction in heatdissipation leads to reduced use of HVACs, which, in turn,insulated as of 2014.15Source: TechSci Research TechSci Research

S a u d i A ra b i a D i s t r i c t Co o l i n g M a r ke tOutlook

S a u d i A r a b i a D i s t r i c t C o o l i n g M a r k e t S i z e , B y Va l u e &Vo l u m e2016E2017F2018FMarket Size (USD 1.202.291.991.740.9820140.8020131.53By Value: 24.24%By Volume: 17.15%0.56By Value: 18.30%By Volume: 13.26%1.35CAGR 2016E-2021F0.471.202012CAGR 2011-20150.6720110.401.060.34Figure 7: Saudi Arabia District Cooling Market Size, By Value (USD Billion), By Volume (Million TR), 2011-2021F2021FMarket Size (Million TR)Source: TechSci ResearchGrowing focus on sustainability across the country has resulted in adoption of various energy conservationmeasures. Additionally, in order to cope with extremely high temperatures, rise in power consumption by airconditioners is being compensated by the use of energy efficient air conditioners. District cooling technology offerscentral cooling for multiple buildings, while bringing electricity cost savings of about 25%. District cooling market inSaudi Arabia grew at a CAGR of 18.30%, in value terms, during 2011-2015, and is anticipated to grow at a CAGR of24.24%, in value terms, during the forecast period on account of its ability to control internal temperature inbuildings, less noise generation and low electricity consumption, as compared to other air conditioning technologiesavailable in the country. Emission of harmful gases such as CO2 has been minimized due to adoption ofenvironment friendly refrigerants in district cooling. Moreover, increase in volume sales and average selling price isprojected to drive revenue growth in Saudi Arabia district cooling market in the coming years.17 TechSci Research

S a u d i A ra b i a D i s t r i c t Co o l i n g M a r ke t S i z e, By Va l u e &Vo l u m eDemand for district cooling technology in Saudi Arabia grew at a CAGR of 13.26%, in volume terms, during2011-2015 and is anticipated to grow at a CAGR of 17.15%, in volume terms, during the forecast period due togrowing construction sector in the country. Demand for district cooling technology is mainly emanating fromsmall scale developments requiring 5,000 to 25,000 Tonnage Rate (TR) of cooling. This prompted multiplechiller manufacturers to offer chillers with tonnage capacity of around 6,000 TR, especially for district coolingplants in the region, in order to target small projects in residential, commercial, and industrial applications.KSA's district cooling market is mainly dominated by demand from commercial establishments.District cooling consumes 50% lesser power comparedto regular window, split or rooftop chiller ACs. In SaudiArabia, where more than half of the total power isconsumed for cooling purposes, district cooling is aFigure 8: Saudi Arabia District Cooling MarketShare in GCC Region, By Value, 2015SaudiArabia,30.00%feasible option.Provinces such as Mecca are projected to become ahub for the district cooling industry in the country dueto increasing developments in commercial, educationaland utility sectors.Rest of GCCCountries ,70.00%18Source: TechSci Research TechSci Research

S a u d i A ra b i a Re f r i g e ra t i o n M a r ke t O u t l o o k

S a u d i A r a b i a R e f r i g e r a t i o n M a r k e t S i z e , B y Va l u eFigure 9: Saudi Arabia Refrigeration Market Size, By Value, 2011-2021F (USD Million)CAGR 2016E-2021FCAGR 2011-2015By Value: 13.38%By Value: 3.702018F2,081.222019F2,327.092020F2021FSource: TechSci ResearchSaudi Arabia refrigeration market grew at a CAGR of over 12%, in value terms, during 2011-2015, and is furtherforecast to grow at CAGR of 13.38%, in value terms, during the forecast period, on account of rising demand fromcommercial and industrial sectors in the country. Due to rising demand for commercial refrigeration systems,especially from cold chain and industrial sectors, Saudi Arabia is one of the largest importers of refrigerationproducts across the globe. Moreover, growing demand for refrigeration systems with eco friendly technologies,particularly HCFC - free refrigerants such as R134A and R410A, is projected to boost growth in refrigeration marketin Saudi Arabia. Further, replacement demand for HCFC - free refrigerants has also contributed to the growth ofrefrigeration in the country.20 TechSci Research

S a u d i A ra b i a H VAC - R M a r ke t O u t l o o k

S a u d i A r a b i a H VA C - R M a r k e t O u t l o o kRising population, increasing disposable income, upcoming residential and commercial projects in the country,new technological advancements and launch of energy efficient air conditioning systems are driving HVAC-Rmarket in Saudi Arabia.Growing demand for HVAC-R systems from the commercial sector in the country can be attributed totechnological upgradation and innovations such as district cooling technology, solar air conditioning systemsand HVAC-R usage. Companies such as Hitachi, Daikin and TVP Solar SA are launching new products andtechnologies that comply with SASO regulations.On the back of rapid economic growth, huge section of the population relocated from rural areas to urbancenters. Around 80% of the urban population lives in three main cities in Saudi Arabia - Riyadh, Jeddah andDammam, and this has increased demand for HVAC-R equipment majorly from these cities, due to theestablishment of commercial and residential units.Other sectors such as travel & tourism are also propelling growth in the country’s HVAC-R market. Accordingto the World Travel and Tourism Council, travel & tourism sector contributed to a share of 7.7% to thecountry’s GDP in 2014 and this is expected to reach 8.5% by 2016. During Ramadan and Hajj, over 3 millionpilgrims gather in Mecca and Medina to perform Hajj and Umrah pilgrimages.Upcoming commercial projects such as airports, high rise buildings, etc., and developments in luxury homesand villas in the residential sector is projected to generate substantial opportunities for HVAC-R industry inSaudi Arabia.22 TechSci Research

S a u d i A r a b i a H VA C - R M a r k e t S i z e , B y Va l u eFigure 10: Saudi Arabia HVAC-R Market Size, By Value, 2011-2021F (USD Billion)CAGR 2011-2015CAGR 2016E-2021FBy Value: 10.03%By Value: Source: TechSci ResearchSaudi Arabia HVAC-R market grew at a CAGR of around 10.03%, in value terms, during 2011-2015 and isfurther projected to grow at a CAGR of 13.11%, in value terms, during the forecast period. Boom in theconstruction sector in Saudi Arabia propelled growth in the country’s HVAC-R market. In Saudi Arabia,temperatures often shooting up to 50 C during peak summer, and thus HVAC-R installation is extremelyimportant in the country.Implementation of new rules and regulations by the government pertaining to the use of energy efficient HVACmachines has further contributed to the growth in demand for HVAC-R systems in the country. Riyadh, Jeddah,Dammam, and Mecca are few of leading regional markets for HVAC-R systems across the country, due toincreasing demand for energy efficient systems, which lower elctricity consumption and reduce input cost.23 TechSci Research

S a u d i A r a b i a H VA C - R M a r k e t S i z e , B y Va l u eSaudi Housing Ministry launched Phase-1 of a housing project in Riyadh, which included construction of 830residential apartments and 13 real estate companies. The organization would be focusing on development ofhousing sector in the country in Phase 2.Phase-2 included the various changes in policies for the real state sector such as reducing maintenance yearsfrom 10 to 5 years, re-scheduling developers payment and parking facility outside apartments.Housing Ministry selected two companies Al-Hakmiah and Emdad Najed, for construction of 888 apartmentsand 2,000 apartments in Dammam. This is projected to drive installation of HVAC-R systems in the Easternregion of the country in the coming years.Saudi Arabia's King Abdullah Economic City (KAEC) is one of the most ambitious construction projects in theworld. The plan is to create a city of two million people and one of the world's biggest deep water ports.According to Ministry of Economy and Planning (MEP), it has been estimated that Saudi Arabia needs toconstruct 2.4 million new houses by 2016 to address the demands of the growing population.Growth in demand from the commercial sector in the country is mainly due technological upgradations andinnovations such as district cooling technology, solar air conditioning systems and HVAC integrated with newtechnologies. Companies such as Hitachi, Daikin and TVP Solar SA are launching new products and technologiesthat comply with SASO regulation.24 TechSci Research

S a u d i A r a b i a H VA C - R M a r k e t S h a r e , B y R e g i o nFigure 11: Saudi Arabia HVAC-R Market Share, By Region, By Volume, 2015 & 2021FNorthern Region2015: 12.00%2021F: 11.50%NorthernBordersCentral Region2015: 34.00%2021F: 34.50%JawfHighestDemandGenerator inSaudi eMakkahWestern Region2015: 26.00%2021F: 26.50%NOTE:-Eastern Region2015: 16.00%2021F: 14.00%BahahAsirNajranEastJizan Western region includes Jouf, Tabuk, Jeddah, Medina, Mecca. Northern Central region includes Northern Border, Qasim, Hail,Riyadh. Eastern region includes Eastern Province Southern region includes Asir, Najran.NorthSouthern Region2014: 12.00%2020F: 13.50%CenterWestSouth25Source: TechSci Research TechSci Research

S a u d i A r a b i a H VA C - R M a r k e t S h a r e , B y R e g i o nCentral RegionCentral region dominated Saudi Arabia HVAC-R market, Major demand for HVAC-R in the region is emanating fromRiyadh Province. Population of the Central region is highest in Saudi Arabia. Moreover, Riyadh is economicallystronger than other regions in the country and registered high per capita income. In addition, increasingconstruction projects in the region such as Al Rajhi Bank Tower, Elegance Medical Tower, Al Majdoul TowerProjects, etc., that are slated for completion in 2016 are anticipated to drive growth in HVAC-R market in theregion during the forecasted period.West RegionMecca and Madinah are a part of the Western region and the most important centers for tourism. Nearly 3 to 4million Muslim pilgrims visit Mecca and Madinah each year. Number of pilgrims visiting Mecca and Madinah arerising and this is projected to propel demand for hotels and resorts in the region. Dar Al-Handasah Group BuildingAbraj Kudai in Mecca, the largest hotel in the world that would have around 10,000 rooms in 12 towers, is slatedfor completion by 2018. Due to such projects, demand for HVAC-R systems from West region of Saudi Arabia isexpected to increase in the ensuing years.East RegionIn 2015, Eastern region of the country accounted for a volume share of 15% in Saudi Arabia HVAC-R market.Construction of economic cities and houses in the region under various development plans announced by SaudiMinistry of Water and Electricity is projected to boost growth in the region’s HVAC-R market. Saudi ElectricityCompany announced plans to construct 16 power projects in Eastern province of AL-Hasa over the next three yearsto address the growing demand for electricity in the region.26 TechSci Research

S a u d i A r a b i a H VA C - R M a r k e t S h a r e , B y R e g i o nSouth RegionSouthern region, which has coastal cities such as Najtan, Jizan and Asir, accounted for a volume share of 12% inSaudi Arabia HVAC-R market in 2015 and this is projected to reach 13.50% by 2021, due to increasing infrastructuredevelopments in the region such as construction of Jizan Economic City in Jizan that would include a port and variousindustrial hubs.North RegionNorthern region accounted for a volume share of 12% in the country’s HVAC-R market in 2015, due to low populationdensity in Northern Borders and Jawf. Volume share of the region in the country’s HVAC-R market is projected toreach 11.50% by 2021, as the region is comparatively less developed than other regions in the country.Figure 12: Saudi Arabia GDP Share,By Province, 20142015 (As Percentage of Total Population)Rest of Saudi Arabia, 15%MakkahProvince,12%Figure 13: Saudi Arabia Urbanization Rate, 2011-83.15%EasternProvince ,55%82.93%82.72%82.51%82.30%RiyadhProvince ,18%20112012201320142015Source: TechSci ResearchSource: World Bank27 TechSci Research

S a u d i A r a b i a H VA C - R M a r k e t S h a r e , B y R e g i o nFigure 14: Eastern Province Housing UnitFigure 15: Riyadh Housing Unit Share, By TypeShare, By Type of House (%)of House (%)Floor in aTraditionalHouse, 1%Floor in aTraditionalHouse, 1%Others, 4%Floor in a 0%Apartments,38%TraditionalHouse, 11%Floor in aVilla, 14%Villas,26%Villas,26%Source: Central Department Of Statistics & InformationSource: Central Department Of Statistics & InformationFigure 16: Madinah Housing Unit Share, ByFigure 17: Makkah Housing Unit Share, ByType of House (%)Type of House (%)Floor in aOthers,Traditional House,4%1%Floor in a Villa,3%Floor in a TraditionalHouse, 1%Apartments,51%Villas, 8%Others,3%Floor in aVilla, tionalHouse, 32%Source: Central Department Of Statistics & InformationSource: Central Department Of Statistics & Information28 TechSci Research

S a u d i A r a b i a H VA C - R M a r k e t S h a r e , B y R e g i o nTable 8: Saudi Arabia Population Share, ByProvince, 2013Hot climatic conditions in the country make installation cesCapitalPopulation(%)Riyadh ProvinceRiyadh25.04%Makkah ProvinceMakkah25.59%Madinah ProvinceMadinah6.55%Qassim provinceBuraidah4.47%Eastern ProvinceDammam15.12%of air conditioning units installed in the country is forecastAseer provinceAbha7.00%to reach 3 million. In March 2016, a three party consortiumTabuk ProvinceTabuk2.90%won a USD20 billion project to build 100,000 homes inHail ProvinceHail2.19%Saudi Arabia. The consortium includes Hanwha EngineeringNorthernBorders ProvinceAr'ar1.17%& Construction, Daewoo Engineering & Construction andJizanJizan5.00%Saudi Pan Kingdom for Trading & Contracting (SAPAC).Najran ProvinceNajran1.85%Rising development of residential projects in Saudi Arabia isAl-Baha ProvinceAl-Baha1.51%expected drive demand for thermal insulation in theJawf ProvinceSakakah1.61%country during forecast period.industrial units in the country. In 2015, about 83.15% ofthe total population in Saudi Arabia lived in urban areas. By2021, the country’s population is estimated to reach 37million. With 7.1 million households, by 2021, the numberSource: The Central Department of Statistics and Information of Saudi ArabiaTable 9: Saudi Arabia Number of Haj Pilgrims, 2011-2015 ource: The Central Department of Statistics and Information of Saudi Arabia29 TechSci Research

S u s t a i n a b i l i t y a n d E n e rg y S av i n g i n H VAC - RS a u d i A ra b i a M a r ke t

S u s t a i n a b i l i t y a n d E n e r g y S a v i n g i n H VA C - R S a u d i A r a b i aMarketMost of the electrical appliances in Saudi Arabia are labelled with Energy Efficiency Rating. Saudi Standards,Metrology and Quality Organization (SASO) modified Standard No. 2663/2012 "Energy Labelling andMinimum Energy Performance Requirements for Air-Conditioners", by adding national modifications thathave been approved by the SASO Council Board in 2014, i.e.SASO2663/2014.According to SASO, cooling capacity for air conditioners at different test conditions should be less than orequal to 70,000 Btu/h (20,000 W).Table 10: Saudi Arabia EER and Star Ratings for Air Conditioners, 2015EER limits (Tested Value)(Btu/h)/w at T1Star Rating**EER 18.11018.1 EER 16.89.516.8 EER 15.6915.6 EER 14.58.514.5 EER 13.4813.4 EER 12

Figure 10: Saudi Arabia HVAC-R Market Size, By Value, 2011-2021F (USD Billion) 25 Figure 11: Saudi Arabia HVAC-R Market Share, By Region, By Volume, 2015 & 2021F 25 Figure 12: Saudi Arabia GDP Share, By Province, 2014 27 Figure 13: Saudi Arabia Urbanization Rate, 2011-2015 (As Percentage of Total Population) 27